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Yahoo invests in two online ad firms as Q3 income drop

There was a lot of news coming out of Sunnyvale, CA, on Oct. 17, the cumulative impression of which was that Yahoo sees rich media as way to jump-start its performance.

The first two pieces of news out of Yahoo was that it has invested in two Internet ad companies. The final piece of news was the company’s third quarter results and, given Yahoo’s expressed disappointment with its performance, the three would seem to be related.

Yahoo’s revenues for the third quarter ended Sept. 30 totaled $1,580 million, a 19 percent increase while its marketing services revenue totaled $1,370 million, an 18 percent increase. Fees revenue totaled $210 million, a 23 percent. While revenues were up, the company said in a statement that the performance did not meet its expectations.

Operating income for the third quarter dropped 25 percent to a total of $202 million. Net income totaled $159 million, or $0.11 per diluted share, compared to $254 million, or $0.17 per diluted share for same period in 2005

The bigger of the investment stories, simply because it follows Google’s YouTube acquisition with a similarly video-oriented deal, is that Yahoo has entered into a definitive agreement to acquire Fysix Corporation, a rich media advertising solutions provider. Financial terms were not disclosed.

Troy, NY-based Fysix’s AdInterax, design module streamlines the technical processes for building of a wide variety of rich media formats, including floating animations, expandable banners and streaming video, as well as surveying and eCRM initiatives. The AdInterax tracking and reporting module tracks traditional metrics including impressions, clicks, and reach and frequency, in addition to other key branding and direct marketing data.

As a result of the deal, Yahoo, www.yahoo.com, plans to develop a self-service rich media platform for marketers that will provide creative assembly and campaign management at no charge.

This solution will be coupled with other Yahoo capabilities including behavioral targeting, geo-targeting and demo-targeting. Yahoo will continue to allow marketers to designate their rich media vendor of choice on Yahoo’s platform.

The company also said Oct. 17 that it has made a strategic investment to acquire a 20 percent stake in Right Media Inc., New York, creator of the Right Media Exchange. Yahoo also will join the Right Media Exchange to offer advertisers the ability to bid on Yahoo’s non-premium inventory, thereby hopefully extending its advertising audience.

Every ad on the Right Media Exchange is auctioned in real-time to the highest bidder, giving participants equal access to media in an open, fair market and enabling competition to drive more value for both sides of every transaction. More than 2 billion impressions are traded daily on the Right Media Exchange.

Right Media recently has raised a total of $45 million in Series B financing, led by Yahoo and including Redpoint Ventures.

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